Translating "Soft" Changes into "Hard" Dollars: Financial Returns from Organisational Culture Improvement

Eric J Sanders, MBA and Robert A Cooke, Ph.D

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Financial Returns from Organisational Culture Improvement

Possibly the best-known longitudinal study that links financial performance to adaptive (similar to constructive) cultures is the classic work by Kotter and Heskett (1992). They show that companies with adaptive cultures performed significantly better than those with non-adaptive, or what we would refer to as defensive, cultures over an 11-year period along various financial indicators. Their research design, however, is retrospective and is not intended to trace the impact of culture change interventions.

The two longitudinal case studies presented in this article complement Kotter and Heskett's research by demonstrating that investments in cultural change programs and positive changes in cultural norms are followed by significant improvements in financial performance. By suggesting that culture leads to performance, the case studies also complement the cross-sectional studies (which show significant correlations between culture and performance but do not demonstrate causality).

These research results should be of value to training and development practitioners when recommending cultural change initiatives to CEOs and other high-level executives of client organisations. The quantitative results should enable them to make a stronger case for the return the organisation will realise from an investment in improving organisational culture.

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